Category: Investor News/Analysis

This is part 7 of the not-so-commonly-seen look into a real, live Ecuador real estate transaction (of my own with my own money) as I reveal all the dirt as it happens in this rare, completely transparent property play.

OK, so today I came to agreement with the seller to buy his 475 m2 (5112 ft2) beachfront lot near Salinas, Ecuador with title issues for $4300.

What’s my plan?

The plan is to buy—> legalize the title issues—> and resell.

Hopefully all within 1-3 months.

That’s it.

Nothing fancy about it.

I know I’m taking a risk here. I may lose everything I’ve invested.

But the potential reward is really good, based on my experience, the lot, when legalized with clear title, is currently selling for at least 2-3 times what I’m paying for it.

Once when I was 20 I bought a car in San Diego for $350 with title issues.

I didn’t know what I was doing and new to the state.

No problems until I went to register the car.

And I found out I couldn’t register it unless I paid an unpaid tax lein that was worth more than the car itself.

So what did I do?

I tried to sell it to an ex-girlfriend.

But then the cops pulled her over and i felt bad and gave her her money back, then I junked the car, it was essentially non-transferable, no one would buy it with the lein it had against it worth almost double the car (it hummed like a helicopter).

A loss.

This time I did my homework, went to the Registry office beforehand and followed up with numerous “experts” I know down here and have concurred that in fact the title issues of this property as mentioned in the previous posts can in fact be cleared in a timely fashion.

Besides, I must get it right cause my ex-girlfriends in Ecuador probably can’t afford it.

Haha, just joking.

We’ll see.

So what price should I put on it?

Anyway, stay tuned, we’ll see how it goes.

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$6000?

“Whew, that’s steep man.” I said as we sat down to negotiate the 475m2 (5112 ft2) beachfront lot I found for sale in Ecuador this week.

“Look, I’ve got another opportunity available, whats the minimum you’d accept?” (Mire, tengo otra opcion, digame cual es lo ultimo?) I asked.

“OK, OK, $5000, but that’s if you pay in cash.” The seller rebuttled.

“Well, I would pay that, but the lot has title issues, and I’m going to have to pay extra to fix that, and there’s a certain risk I’m taking on in that the title issues may not even be correctable, so because of that, I’ll pay maximum $4000.” I responded using the title problems as a bargaining chip.

And the bargaining went on…

Here’s 8 tips I have when bargaining with Ecuadorians.

8. Ecuadorians almost always will be willing to round off asking prices. For instance, if they’re asking $28k, they’ll almost always accept at least $25k, but don’t let that be your first offer. In my case, the seller was asking $6k so I knew he’d at least accept $5k.

7. A “no” is never a “hard no” in Ecuador, it just means “no right now”. Be slow, keep calling and be persistent, once they get a comfort level with you they might start lowering the price when initially they didn’t want to.

6. Learn a few key common very Ecuadorian phrases like “Cual es lo ultimo?” (Whats your lowest price?) and “Mira, tengo el efectivo, uno tras otro.” (I’ve got cash and I’ll lay down the bills, one after the other.) “Es mucho.” (That’s too much.)

5. Don’t be afraid to throw out a ridiculously low bid, at maybe half the asking price, they may not say yes but they won’t get offended and it gives you a good starting point for negotiating.

4. Be patient and don’t be afraid to throw a number out there and let it marinate while the seller thinks about it, they just may come around with time.

3. Caution, they may try to change the end asking price or terms on you after they’ve already been settled on if they feel they are selling to cheap. And generally, the spoken word isn’t a binder in Ecuador so once you got a deal it’s best to work fast before they have sellers remorse.

2. Don’t show money. You don’t have to, they’ll take you serious even though you’re dressed like a dirty bum simply because you are a foreigner. If you show money they may be more reluctant to bargain price.

1. Stay out of the picture as long as possible. As I did early on in this post series, try to have a local friend talk for you at least until you get an asking price to be sure you’re getting quoted a price a local would offer to another local, then you can come into the picture.

We’ll see what happens from here, stay tuned!

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Jeeze, why can’t this ever be easy? I thought earlier today.

I was checking out the cheap beachfront house I told you about in the last update of this series where I walk you through every step of a real, live property deal I’m currently making in Ecuador, you’ll come with me as we go from start to finish or from the buy all the way to the re-sell.

I was a little down cause the house I told you about 2 days ago, and the one I was looking at was “technically” beachfront, but not really, it was kind of far away from the beach although the land separating the house from the ocean was un-buildable do to an estuary or bay area just to the side of the house.

It kind of looked like the house, along with the ones next to it were in a flood plain that may have problems sooner or later.

But the house itself was pretty nice for the low price and you could see the ocean from the front windows.

But I still decided against it.

It doesn’t matter how cheap something is if you’re going to have a tough time finding someone else to buy it.

But I kind of liked the area near Salinas.

So after the sellers of the $21k house left, as I walked out sure enough I found another lot for sale on higher ground, right in front of the ocean I did like.

I called and met with the owner and he said the lot, a beautiful, flat 475 m2 (5112 ft2) lot right on the ocean… beachfront… beachfront… with no busy street in between it and the ocean while also protected by an elevated pitch, was for sale for $6k.

Why so cheap?

Because that’s where it got tricky.

It was “Comuna” land.

And all he had was a “Right of Possession” (Derecho de Posesion).

Remember those 3 key papers I told you to ask any property owner and check out before buying? The Escritura, Predios and Certificado del Registro.

Yea, he didn’t have any of that.

Let me explain. If this sounds complicated its because it is!

“Comuna” or “Communal” land in Ecuador is common on the coast of Ecuador, especially in the small towns, and its when there are lots that have not been registered in the Municipality that are instead “owned and administred” by the local Comunas which serve like Town Councils and to me are quite socialistic.

While Ecuador is divided into Provinces and each province into “Cantones” where each “Canton” has there own Municipal. Within each Canton in the more rural areas you may have several dozen local Comunas.

Comunas will often gift the land to members of the local Comuna but they can’t give out Titles (Escrituras) while instead they give something called an indefinite “Derecho de Posesion” (Right of Possession).

You probably can own for a long time without problems but remember, you are still not regarded as the legal free hold title owner of the land with only a right of possession.

And for a quick buy-resell it definitely wouldn’t work.

I researched this thoroughly 2 years back on a visit to Ecuador I considered buying a lot right in the center of Montanita which only had a right of possession from the local Comuna.

Some will tell you that you can’t legally attain the Title (Escritura) nor sell Comuna land.

They’re wrong.

I know several people who have, in Montanita. But it can be a difficult, costly (and lengthy!) process to legalize the property and attain proper Free-Hold-Title (Escritura) as recognized by the banks and everyone else in Ecuador.

You’ll need a document from the Comuna releasing the property to the Municipality which sometimes the more troublesome Comunas (like the one in Montanita) isn’t always willing to give.

Because once you have a free hold Title (A Municipal-registered Escritura) its yours and not theirs. While its still theres whenever there is a change in ownership you must do it through them having the Comuna board of directors sign off on the sale and they charge a hefty fee (usually around 20-30% of the purchase price) but few buyers tell them the honest amount they paid.

I, like most foreigners and locals in Ecuador, will advise you to only buy property that has proper title (Escritura) as described in my last email.

But as one local told me once, sometimes the price is low enough that you might want to risk it.

What’s the worst that could happen?

Easy, the Comuna could make some excuse to take the property back from you. But its not common.

What will I do?

You’ll find out soon in the next email of this series.

Stay tuned.

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Guayaquil from above.

OK, so I found a property that peeked my interest.

A 2 bedroom 2 bath one story house that’s supposedly beachfront near Salinas posted for sale online asking $21,000.

Definitely a fixer-upper. Undervalued, I think so.

Today I sat down with the owner in my B&B in Guayaquil.

Like someone who’s done this before I asked her to show me 3 things before I even agree to go see the house… and she did.

1. The Escritura: This is a document registered and legalized by a NOTARY that spells out the recent ownership history of a property, the surroundings and it serves as the legal TITLE or DEED of ownership in Ecuador.

2. The Predios: These are nothing more than the receipts of the annual tax payments to the local Municipal (Municipio) where the property is located proving the property is up to date and properly registered in the Municipal.

3. The Certificate of Registry (Certificado del Registro de Propiedad): This is a ceritificate from the local Property Registrars Office (Registro de la Propiedad) proving the property title has been properly registered.

For all three make sure the Tax ID number of the property matches up (in Ecuador called the NUMERO DE CATASTRO).

Not every purchase is the same in Ecuador, but these are the big three I ask for whenever I find a new property I’m interested in.

They’ll probably supply you with copies.

I’ll then go to the Property Registrar office and order the certificate myself to ensure the property is indeed registered and under the name the seller says it is.

You can then go to the Municipal and get a certificate proving all taxes and debts (Cerificado de no ser deudor) are paid on the property proving their are no leins against it.

Then you could go to the Notary where the current Title (Escritura) has been registered and ask for verification that the “Matrice” as they call it is indeed on file.

Title insurance doesnt really exist in Ecuador, and if it does, it’s expensive, so doing extra diligence like this is always good to prevent headaches.

An ignorant person might assume giving someone money for a property makes them the owner, wrong, in Ecuador these three documents properly registered do.

Should you use a lawyer?

It’s not really necessary, but if you can find one you can trust it couldn’t hurt, but that’s easier said than done!

Now you too are a savvy buyer in Ecuador!

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“Get down, get down, he’ll see you!” My Ecuadorian friend gasped…

…as we both sat in a car outside a gas station waiting for the seller of a property in Ecuador I was interested in.

The seller arrived.

And we didn’t want him to see me.

You see, I wanted my local friend to do the initial negotiation for me so the seller didn’t know a foreigner was interested.

Because I’ve seen that the price can and does rise – SOMETIMES – when the locals see a foreigner is interested in their property.

But more precisely, they often get stiffer with the price and won’t be as quick to lower it cause they think the foreigner will buy anyway.

So that’s exactly what my friend did, he went inside the gas station and sat down with the owner to negotiate, while I stayed in the car.

There’s advantages and disadvantages to being a foreigner in Ecuador.

A big advantage I’ve experienced is in the business world, where you get “instant cred” and people listen to you just cause you’re a foreigner… it’s true! It also helps with the opposite sex to look different than the norm.

But a big disadvantage is that the locals think you have money, so at times, not everyone, will try to charge you more for things, and if buying property that could mean thousands.

This happens everywhere in the world to foreigners.

I lasted all of 5 minutes in Spain before I got ripped off paying about double for a taxi ride than I should have.

Luckily its not that bad in Ecuador compared to some countries I’ve been recently, like India, where many (not all) of the locals are ruthless and work together to extort as much as they can from overly-trustful foreign tourists, particularly the Japanese are the easiest to fool (I saw).

But they got me too, bast@rds!

It is what it is. It’s all part of the fun.

You gotta play the game by the rules.

And that’s what I did this week as I started my newest property search on the coast of Ecuador.

I’m looking for a great deal.

Could be a lot, a fixer-upper, we’ll see what I find.

First I hit the local paper El Universo where in the Sunday Classifieds ads for properties on the coast will often get mentioned.

Now I’ve hit the coast.

First I’m identifying where I’d like to buy, then specifically which property.

People amaze me when they say they saw nothing for sale.

Actually everything is available.

You just have to do some investigating to discover the owners.

That’s how it works down here.

And I have noticed “the spread” is getting bigger in that the range of prices people are asking is widening, with some asking ridiculously high prices, while others ask the same prices as years ago making this a good time to buy and sell in Ecuador!

But this won’t last forever, the window is closing. In nearby Colombia, Brazil and Argentina the prices are already high.

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